- Growing inequality fueling groundswell of discontent: Lagarde
- Countries should give more support to low-skilled workers
World leaders need to better manage the frustration over the failure of globalization to deliver widely shared benefits, IMF Managing Director Christine Lagarde said.
While the world has enjoyed unprecedented economic progress over the last 70 years, the transformation has caused “dislocation and hardship,” Lagarde said in the text of a speech to be delivered Tuesday in Toronto.
“Growing inequality in wealth, income, and opportunity in many countries has added to a groundswell of discontent, especially in the industrialized world -- a growing sense among some citizens that they ‘lack control,’ that the system is somehow against them," Lagarde said.
History has shown that closing borders and increasing protectionism isn’t the solution, she said. Instead, countries need to extend the benefits of openness and integration, while alleviating the side effects, Lagarde said. “We need to make globalization work for all.”
Governments can help by creating a sound basis for growth, and fiscal policy needs to play a bigger role, Lagarde said.
Countries should also step up support for lower-skilled workers and strengthen social safety nets, she said. The U.S. could cushion job losses by raising the federal minimum wage and increasing the earned income-tax credit, she said.
She also encouraged countries to redouble their efforts to expand trade. “There is a growing risk of politicians seeking office by promising to ‘get tough’ with foreign trade partners through punitive tariffs or other restrictions on trade,” she said.
Republican U.S. presidential candidate Donald Trump has promised to impose tariffs on imported goods to protect American workers, an approach the IMF has said may actually hurt the U.S. economy.